Cities Cry Foul on Stimulus Cash

Several Mayors Challenge the Way Governors Are Doling Out Project Funds

By

Suzanne Sataline

Updated May 11, 2009 11:59 p.m. ET

As he unveiled his proposed budget earlier this month, New York City Mayor Michael Bloomberg threw in a comment about the dollars that got away.

While the city stands to collect more than $2 billion of federal stimulus money over three years to help pay Medicaid costs, "we're getting a half billion less than Congress was intending to give us," said Mr. Bloomberg, an independent.

Whom does he blame? New York Gov. David Paterson, who chose not to pass along discounts that the state received from Washington, meaning the city must swallow $543 million in health-care costs, city lawyers say.

A spokeswoman for Mr. Paterson, a Democrat, defended the decision. "We believe that this is a fair and equitable distribution," she said.

Across the country, fights between local and state authorities have erupted as federal stimulus money is doled out. About $280 billion of the $787 billion federal stimulus package passed in February is set to flow through state and local governments.

Many mayors are grateful for getting some money they wouldn't have had otherwise. Still, mayors of several cities have blasted their governors for denying them money for big projects, for favoring suburban requests over urban needs, and for taking back state aid after doling out federal dollars.

The governors have said they are trying to balance the needs of many municipalities, and that they must follow the dictates of Congress or their own state laws.

The disputes touch on a longstanding area of tension between city halls and state capitols. As more federal money for local needs is funneled through states, cities have complained that they aren't getting as much as they feel they deserve for the size of their population.

Hal Wolman, director of the George Washington Institute of Public Policy in Washington, estimates that direct federal dollars to city budgets dropped from as much as 20% in the 1970s to as little as 5% today. The stimulus money was meant to be distributed quickly to create jobs, so Congress had to rely on the states' existing methods of passing along aid, Mr. Wolman said.

ENLARGE

Charlotte, N.C., Mayor Pat McCrory, above center with other mayors in Washington in February, has complained to North Carolina Gov. Bev Purdue, below, about how the state allocates federal funds. The state says the region that includes Charlotte got $100 million of the $735 million the state received for roads.
Getty Images

"If you use state legislatures to distribute federal money, the suburbs are going to do better than cities," he said. Suburbs "have grown enormously, and in political strength, and cities have not."

Officials in Charlotte, N.C., needed about $220 million this year to finish Interstate 485, a highway that would circle the city. Charlotte received far less than that -- about $4 million from the stimulus funding for road refurbishing -- only to learn that the state would take back nearly $4 million it had planned to provide to the city in highway funds.

Pat McCrory, Charlotte's mayor, charges that states often hand out federal dollars "by politics and not by need." Mr. McCrory, a Republican, has complained to the office of Democratic Gov. Bev Perdue in letters and phone calls.

North Carolina, like several other states, has a law that establishes how aid must be distributed. In this case, a quarter of the aid must be doled out equitably to seven regions, with the rest divided based on population and need, such as the miles of roadway to be completed. The region that includes Charlotte received more than $100 million of the $735 million the state received in stimulus money for roads and bridges, a state transportation spokeswoman said.

"People can complain it shorts the urban areas, and there may be some legitimacy to that," said Gene Conti, secretary of the North Carolina Department of Transportation. Mr. Conti pointed out that the city will be getting $20 million of federal stimulus money to build a bus maintenance center.

In New York, the city's legal department complained in a letter to federal Medicaid officials that the state had wrongly read the federal law and did not pass along to cities the Medicaid discounts that the state itself had received. The federal Center for Medicare and Medicaid Services is reviewing the letter, said spokeswoman Mary Kahn. But "we don't have the authority to instruct the state on how it deals with its governmental entities...as long as it's following the guidelines" of the stimulus legislation, she said.

ENLARGE

North Carolina Gov. Bev Purdue
Associated Press

Mr. Bloomberg urged political donors at a lunch last month to back political candidates who favor direct aid to cities, bypassing state oversight.

So far, though, few of the mayors' complaints have produced results, leaving city officials searching for money elsewhere, or scuttling coveted projects.

In Rhode Island, Providence Mayor David N. Cicilline, a Democrat, said city schools were happy to get about $10.2 million in federal money. Then the state Legislature cut state school aid by the same amount. "It clearly undermines the intention" of the stimulus legislation, Mr. Cicilline said.

The Rhode Island governor's office says all mayors in the job-strapped state need money. "The [Providence] mayor has every right to advocate for more funds for his city. But the state is obligated to distribute the funds for all cities and towns appropriately," said Amy Kempe, a spokesman for Rhode Island Gov. Donald Carcieri, a Republican.

Residents in Greenwood, Ind., planned to widen a road leading to I-69 in hopes of attracting businesses, Mayor Charles Henderson said. Instead, a regional authority gave the city $1.2 million in federal stimulus funds to build a pedestrian trail bridge over a road. "It does not stimulate long-term economic development, but we're going to take that money," he said.

Of the $657 million that flowed into Indiana for transport projects, the regional agency that includes Greenwood got $39.5 million and dispensed it based largely on project readiness.

"Not a lot of places had projects that were shovel ready," including the Greenwood project, noted Lori Miser, executive director of the Indianapolis Metropolitan Planning Organization. "We did the best we could in dividing up money amongst our 40 communities."

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